The time has come for you to buy a new car. You think you are ready, you know what kind of car you want, you’ve shopped around for pricing and you have several options at hand. The trick now is financing the vehicle. Getting the right auto loan is a factor of being prepared. Here are some tips about getting organized to find just the right auto loan for you.
Know How Much You Need
The first step is to know how much you need. Understand the general price of the car you want, and know how much you can offer as a down payment. If you have a current vehicle, research the potential trade-in value.
Pre-approval can often shorten the process of getting financed. This will tell you how much you are able to borrow. Be careful to address what you can afford as well.
Know Your Credit
Obtain a free copy of your credit report from the three major credit agencies. You are entitled to these free reports once a year by law. A good credit score allows you leverage when negotiating your loan.
Scan your report for mistakes. You would be surprised how often this happens. These mistakes can be removed from your report by you submitting a request for removal in writing. Every “black mark” you remove will improve your credit score. If you have small debts showing that you can pay off, do so. This will improve your debt-to-income ratio, which will also help negotiate better loans.
Your monthly payment is only one part of the loan. You may be able to greatly reduce your loan with a longer term of repayment but this is rarely the best idea. With a longer loan, you are going to pay a lot more in interest and the loan may go longer than the car’s value holds up. In other words, you could wind up upside-down, owing more on the car than it is worth.
If you need to finance a car for longer than five years, it is likely that you cannot afford the vehicle. Consider less expensive options.
Shop around to compare rates from different lenders. Financing through the dealership is easy, but often you might find better rates from your own bank or a credit union. To get the best rates and loan for you, take the time to explore your options. Interest rate is everything when it comes to borrowing money.
Go for a fixed interest rate to insure that your payments will not change. Make sure that you get a loan without pre-payment penalties so that you have the freedom to pay it down early. Also, explore safety features that will enable you to survive emergencies such as disability or job loss.
In the end, getting the right car loan is a matter of being prepared and organized. Consider your options and be aware of your current situation. If you need to explore options for car loans, check out our loan types page today.